Business Combinations (Tables)

9 Months Ended

Sep. 30, 2013

Schedule of Recognized Identified Assets Acquired and Liabilities Assumed

The following table provides the preliminary purchase price calculation as of the Acquisition Date and the identifiable assets purchased and the liabilities assumed at their estimated fair value. These fair value measurements are provisional based on third-party valuations that are currently under review and are subject to refinement for up to one year after the Acquisition Date based on additional information obtained by Management that existed as of the Acquisition Date.



Purchase Price:
FirstMerit shares of Common Stock issued for Citizens' shares				55,468,283
Closing price per share of the Corporation's Common Stock on April 12, 2013				$	16.68
Consideration from Common Stock conversion (1.37 ratio)				925,211
Cash paid to the Treasury for Citizens' TARP Preferred				355,371
Cash paid in lieu of fractional shares to the former Citizens' shareholders				61
Consideration from the warrant issued to the Treasury for Citizens' TARP warrant				3,000
Total purchase price				$	1,283,643
Preliminary Statement of Net Assets Acquired at Fair Value:
ASSETS
Cash and due from banks	$	544,380
Investment Securities	3,202,577
Loans	4,624,293
Premises and equipment	138,536
Intangible assets	84,774		¹
Accrued interest receivable and other assets	678,639
Total assets	$	9,273,199
LIABILITIES
Deposits	$	7,276,754
Borrowings	908,824
Accrued taxes, expenses, and other liabilities	78,816
Total liabilities	$	8,264,394
Net identifiable assets acquired				1,008,805
Goodwill				$	274,838

1 - Intangible assets consist of core deposit intangibles of $70.8 million and trust relationships of approximately $14.0 million. The useful life for which the core deposit intangible and the trust relationships are being amortized over is 15 years and 12 years, respectively.

Business Acquisition, Pro Forma Information

The following table provides the unaudited pro forma information for the results of operations for the three and nine months ended September 30, 2013 and 2012, as if the acquisition had occurred January 1 of each year. These adjustments include the impact of certain purchase accounting adjustments including accretion of loan marks, which makes up the vast majority of the adjustments, followed by intangible assets amortization, investment securities amortization, fixed assets depreciation and deposit accretion. In addition, the $69.1 million in merger expenses previously discussed are included in each period presented. The Corporation expects to achieve further operating cost savings and other business synergies as a result of the acquisition which are not reflected in the pro forma amounts. These unaudited pro forma results are presented for illustrative purposes and are not intended to represent or be indicative of the actual results of operations of the combined corporation that would have been achieved had the acquisition occurred at the beginning of each period presented, nor are they intended to represent or be indicative of future results of operations.



	Three Months Ended September 30,				Nine Months Ended September 30,
	2013		2012		2013		2012
Total revenue, net of interest expense	$	342,756	$	325,086	$	959,045	$	949,884
Net income	66,237		89,193		221,468		528,691

Note: 2012 net income includes approximately $276.8 million of tax benefits as a result of Citizens restoration of its DTA.

Acquired Impaired and Non-Impaired Loans at Acquisition Date

The provisional fair value of loans at the Acquisition Date are presented in the following table:



	Acquired Impaired		Acquired Non-impaired		Acquired Loans Total
Commercial
C&I	$	95,188	$	1,664,912	$	1,760,100
CRE	380,039		359,066		739,105
Construction	13,399		17,135		30,534
Total commercial	488,626		2,041,113		2,529,739
Consumer
Residential mortgages	233,007		279,736		512,743
Installment	54,377		1,165,235		1,219,612
Home equity lines	48,598		313,601		362,199
Total consumer	335,982		1,758,572		2,094,554
Total	$	824,608	$	3,799,685	$	4,624,293

The following table presents the provisional fair value of loans acquired from Citizens as of the Acquisition Date:



	Acquired Impaired		Acquired Non-Impaired		Acquired Loans Total
Commercial
C&I	$	95,188	$	1,664,912	$	1,760,100
CRE	380,039		359,066		739,105
Construction	13,399		17,135		30,534
Total commercial	488,626		2,041,113		2,529,739
Consumer
Residential mortgages	233,007		279,736		512,743
Installment	54,377		1,165,235		1,219,612
Home equity lines	48,598		313,601		362,199
Total consumer	335,982		1,758,572		2,094,554
Total	$	824,608	$	3,799,685	$	4,624,293

Reconciliation of Carrying Amount of Acquired Loans

A reconciliation of the contractual required payments receivable to the carrying amount of acquired loans at the Acquisition Date is as follows:



	Acquired Impaired			Acquired Non-impaired			Acquired Loans Total
Contractual required payments receivable	$	1,086,503		$	4,020,812		$	5,107,315
Nonaccretable difference	(130,096		)	—			(130,096		)
Expected cash flows	956,407			4,020,812			4,977,219
Accretable yield	(131,799		)	(221,127		)	(352,926		)
Carrying balance	$	824,608		$	3,799,685		$	4,624,293